American Realty Capital New York Recovery REIT purchased 256 West 38th Street for $48.6 million on Dec. 26. The seller – a joint venture of East End Capital and GreenOak Real Estate – had purchased the property in 2011 for about $30 million.
The 118,200-square-foot building has undergone approximately $4 million in renovations since being taken over by the partnership, including lobby, elevators, bathrooms, HVAC, façade and windows, utilizing a more modern feel, avenue building-type feel. “(We were) trying to bring a more classé aesthetic to a mid block,” said David Peretz, managing principal at East End Capital.
The partnership’s strategy was to upgrade a midblock, Class B office building into an A-level offering that could attract higher quality tenants, explained Mr. Peretz.
Womenswear retailer, Caché, occupies the entire third and sixth floors of the building, having signed a 43,100-square-foot, ten-year lease in the first quarter of 2012. The retailer was initially seeking space in an avenue building but were impressed by the prebuilt units and price point of 256 West 38th, Mr. Peretz said.
Other tenants include United Auto Workers, Insight Research and Gerard Yoscaand J’Envie.
The building is in striking distance of Penn Station, Madison Square Garden and Herald Square, and features both traditional office and more open, loft-like space. It could be a good home for companies frustrated by the high rents and low vacancies in Midtown South, said Mr. Peretz.
Suitors for the property were many, Mr. Peretz said. “It got a ton of attention.” Three types of groups expressed an interest in the building: institutional investors, families and private buyers who have historically been active in the Garment District and opportunistic investors looking to capitalize on tenants priced out of Midtown South, said Will Silverman, senior managing director with Studley’s Capital Transaction Group, which represented the seller.
“With demand outpacing supply for quality New York investment properties, the area of midtown just below Times Square is becoming a favorite market among both tenants and investors,” said Mr. Silverman.
The buyer, American Realty Capital, did not respond to calls for comment for this article.